ISLAMABAD (APP) - Sustained efforts of the government resulted in discovery of about 174 billion tons Coal reserves in Thar deserts in Sindh, having potential to fulfill the energy requirement of the country for hundred years.

To facilitate the investors in Thar Coal field more than Rs.two billion have been spent on the discovery, evaluation of coal and development of infrastructure, official sources told APP on Wednesday.

Government attaches high priority towards development and exploration of indigenous minerals to mitigate import as well as enhance the share of mineral sector in the national exchequer.

National Mineral Policy 1995 formulated by the previous PPP Government enhance international competitiveness of the country because of the attractive regulatory and fiscal regimes.

As result of the 1995 policy the mineral sector secured direct foreign investment of US $ 8000 million and augmented revenue receipts from the mineral sector manifold.

Meanwhile, Geological Survey of Pakistan has launched a project to explore and confirm more coal deposits in Kohlu-Chamalang areas of Balochistan.

In order to remove deleterious material from indigenous coal to make it suitable for utilisation in processing industries Ministry of Petroleum and Natural Resources has facilitated private sector to import coal washing plants.

Sources told Saindak Project Balochistan being operated by Chinese company M/s MCC, has started production of 16000 tons Copper, Gold and Silver per year since 2003.

A joint venture of two foreign companies is preparing a feasibility study on mining and processing of Reko Diq deposits in Balochistan to produce 72000 tons Copper concentrate in the initial stage by investing US $ one billion.

Federal Government and the provincial government of Balochistan are providing all required assistance to the company in this regard.

It was learnt that the country had Iron resources of more that 600 million tons, however, owing to its low grade it could not be utilised in Pakistan Steel, which was importing iron ore by spending huge foreign exchange. The government has attached high priority to utilise indigenous iron resources, sources said.

Pakistan Steel has been facilitated to acquire three leases of iron deposits in Balochistan while efforts are afoot to develop a mechanism for up gradation of indigenous iron resources to make it acceptable for utilisation.

In this connection, Ministry of Petroleum and Natural Resources has conducted a feasibility study on upgradation of Chichali Iron Ore through a Chinese Consultant, M/s MCC.

It is unfortunately very sad that we have to rely on matters related to energy and power which are intricately linked to economics on the likes of Hakeem Zaid Hamid. Unfortunately, the level of journalism and awareness in our country is such that even the simplest of information is twisted around owing to lack of analysis.

And people like me who have been working with Energy and Power companies, regulators and investors in Pakistan and abroad are partly to blame as we are busy doing our jobs rather than launching public awareness campaigns and countering misperceptions. So here are my two cents in light of my 10 years of practical work experience and research on this sector:

1. Quality of the Thar Coal Reserves: Yes, these are very large reserves by any standard, however the standard and nature of the reserves is of very low quality. As a result, there are a number of technological, logistical and feasibility challenges which make project economics very tricky and hence make any references to the Thar coal resources as "black gold" rather laughable.

2. Government's Failure on Thar Coal: It is not that the GoP or the Sindh Government has never tried to develop these reserves. I for one am aware of ongoing efforts to seek investment by the GoP particularly the PPIB to exploit these resources since before 2001. (Some more recent litreature can be found on the PPIB website) The key issue here has been that owing to the low quality, the extraction cost of coal is high and as a result the cost of any electricity produced from this coal will not be cheap and the GoP is essentially not able to approve these higher tarriffs. This was the key breaking point with respect to discussions with the Chinese. Furthermore, I understand that there have been issues between the GoP and Gov. of Sindh which are secondary contributors to slow development pace.

3. Copper-Gold Reserves in Baluchistan: There are two key projects in Baluchistan which exploit Copper and associated Gold deposits: Riko Diq and Saindak.
One of the small developments in early Musharraf era was leasing out Saindak Project to Chinese investors. At that stage, Saindak Project was quite a significant disaster of the GoP with something like 0.5 billion dollars (at that exchange rate if i remember figures correctly) of investment having been shut down with the project being complete but not having started owing to lack of working capital. Nevertheless, the project was not very feasible again owing to low quality of resource and costs being high. Nevertheless, I believe that the project is currently in operations but facing some difficulties.
The Riko Diq resource is however a world class copper-gold resource which was leased to BHP Billiton (leading Australian natural resource company) "through the proper regulatory channel" established by the GoP and the Govt. of Baluchistan sometime in the late 90s. BHP Billiton worked on the development of the project (feasibility etc) and I believe some years ago it sold its rights to a Chilean company which is one of the leading copper-gold developers in the world. Again, while I am not aware of intricate details, I believe that while progress on the project has been slow (remote location, difficult development, technical challenges, slow regulatory process and Pakistan/Baluchistan investment environment some of the contributors), all regulatory requirements would have been followed here. There is no question in my mind of a "sell out" here as project was alloted much earlier than Mush Govt. and the rules and lawazmaat for seeking international investment into a country have been followed by both the Government and the investors here.

4. Privatisation in Pakistan: Privatisation is a controversial topic so say the least, but nowhere in the world is it more so than Pakistan today. The benefits of privatisation when rightly done are accepted world-wide and the perils of privatisation in the wrong environment are also well documented. Despite bad perception, the track record of large privatisations in Pakistan has been fairly good, MCB Bank, Habib Bank, Allied Bank, PTCL, Pakistan Refinery are some of the successfully privatised entities after following a transparent and competitive process. The main privatisation disaster has been KESC, the key reasons for which are well established (kundas, kundas and ghundas) and in my opinion despite everything it should be viewed as an achievement that KESC was sold for anything over Rs. 1 in the sense that the losses which were to be booked by the GoP for the past 5 years have been the investors headache (my prayers are with the current owners!). Nevertheless, with the cancellation of the Pak Steel privatisation (a separate topic) all privatisation has come to a halt.
I would request anyone who is overly and passionately critical of privatisation to please look up the privatisation progress made in Turkey with respect to energy and power sector over last few years and compare the pace with Pakistan. Turkey is ruled by an Islamic party and are much more educated and informed on the ways of the world than our nation, nevertheless they have swiftly and intelligently privatised their so called "strategic" assets and "family silver" and are keen to seek international invetors who have flocked to their auctions. In addition last year the British Government, privatised the nuclear power assets of British Energy (think "strategic") to none other than their first arch rivals in the world: the French, Electricity de France!

5. The Tarriff Problem For Pakistan's investor profile there were catastrophic mess ups by the GoP during 1992-2002 era summarised as: Benazir Govt invites foreign investment at high tarriff; lots of das nambarees across the board as too many IPPs set up with high tarriffs and 10 fee sads; Nawaz govt comes in and instigates criminal legal proceedings against all IPPs and GoP officials/reps; IPPs and their international investors are persecuted and harassed; court proceedings and bail before arrest warrants abound. In 2002, the Musharraf Government finally agreed upon revised tarriffs with IPPs and resolved all ongoing disputes. End result for international investors "don't invest in Pakistan as one elected Govt. signs contract and the next one takes you to court". End result for GoP officials "don't sign off on any tarriff higher than 6 cents, infact don't bloody sign anything!"

6. Current Regulatory and Investment Environment: As a result of IPP crises and its aftermath, when world oil prices peaked in 2007 at around $140 per barrell we were still offering power tarriffs to new investors which were agreed in 2002 when oil prices were $25 per barrel. Furthermore, with rising steel prices and demand for power generation equipment, project costs increased many fold during this period. As a result, no new investment was possible in the power sector or in renewable energy (wind, solar) with the GoP officials not being able to show any flexibility in the environment of distrust where one department did not trust the other and most believed that all foreign investors are chors.

Well thats my take on some of the things that have come to mind with respect to this thread. I recognize that I am far from being the ultimate authority here and readers are welcome to do their own research and come to their own conclusions. I have written numbers and facts from memory and will post corrections if necessary on separate posts with any edits to this post limited to spell checks and grammar.

Thar coal fields are also present in india too (rajasthan and gujrath) with significant quantities, but only <5&#37; of the coal is feasible for mining as the coal is of bad (mostly lignite/E/F) quality / its too deep for commercial extraction. At present companies like reliance, ongc are investing on research for underground coal gasification in various univ across India.

KARACHI: Sindh's Chief Minister, Syed Qaim Ali Shah, has said Thar Coal Water Energy Project is the most important project as it will not only bring development and prosperity in Sindh but will also be beneficial for Pakistan in general.

Shah made the statement during a meeting with the Chief Executive, officers amd consultants of Sindh Engro Coal Mining Company on Wednesday evening.

He said that there is an acute shortage of electricity in the country. and the power shortage is a;sp increasing with rapid population growth. The Thar Coal project will help to cater the electricity need of the country for years.

The Sindh CM said that Pakistan&#8217;s development and prosperity depend on thecompletion of this project.

He told the meeting that the Sindh govt is providing basic infrastructure in the Thar as water supply is being ensured while an Air-Strip is also being developed to provide services to the small aircraft.

He apprised many development projects are underway while land surveys have been started.

Syed Qaim Ali Shah said that we need the coal of Thar and we want coal digging and exploration of other resources be started as soon as possible.

He noted that a Pakistani scientist has given assurance that a 500 megawatt electricity generation plant could be established through the gasification of coal at only one block of Thar Coal site, within one-and-half years.

Earlier, Chairman of the company, Dr. Kayan informed the meeting that his company is the largest engineering company in Coal mining sector and explores total 70 per cent of the total coal in China.

He congratulated the Sindh Chief Minister for initiating the Thar Coal project and said it will be very fruitful for the people.

Every so often a new member digs up the story of coal reserves without having the slightest idea of the investment, technical know-how and the gestation period involved before any of these reserves can actually be put to some use. These reserves have already been discussed in different threads in this very forum to the nth degree.

No doubt every one in the government is stupid; there is a Zionist conspiracy to deprive Pakistan of her natural wealth. Only the brilliant TV show hosts have the presence of mind to remind the general public how the establishment has been deliberately delaying the exploitation of this natural wealth for the last 60 odd years. Let us all jump with joy with the latest realization.

In Pakistan, people, who have absolutely no knowledge of an issue under discussion, tell conspiracy theories about it with such conviction that one starts believing that perhaps these people are narrating a firsthand account of acts to which they were eye witnesses.

Something similar is happening with Thar Coal today. Print and electronic media are awash with stories about how we have the worlds largest reserves of coal in the Thar desert but still we are not benefiting from this coal.

Being very familiar with the Thar coal project in my professional capacity, I find the proliferation of such myths quite amusing, even bewildering. Perhaps, it would be better for us as a nation to investigate the facts of an issue first instead of immediately resorting to emotional sloganeering.

Coal occurs in nature in different types. The deposits at Thar are of Lignite type of coal. These deposits have very high moisture content with water level approaching almost 50% and are considered to be of inferior quality. This coal is highly volatile and cannot be transported over long distances. So, exporting this coal after extraction from ground or transporting it to more convenient locations is not possible. That is why it is suitable primarily for mine-mouth power generation.

The size of these reserves is being reported as 175 billion tons and this figure is being repeatedly touted on the media as enough for fulfilling our power generation needs for centuries to come. At the moment the top ten countries with largest proved recoverable lignite coal reserves in the world are as follows:

Proved recoverable Lignite Coal reserves: (see table)

Energy council report

As shown in the table above, the country with the largest proved recoverable reserves of lignite coal in the world is Australia with about 37 billion ton with the sum of all such reserves all over the world being about 150 billion ton. So if the recoverable lignite reserves at Thar are actually proved to be 175 billion tons, then these would be greater than total reserves all over the world combined.

The fact is that the reported reserves of 175 billion tons at Thar are not proved-recoverable reserves but rather the bulk of these reserves have a relatively low degree of geological assurance. Out of these purported 175 billion tons, only about 2.7 billion tons are measured reserves while about 9.3 billion tons are indicated reserves. The remaining 163 billion tons are inferred reserves (lying within a radius of 1.2 to 4.8 km from a point of coal measurement) and hypothetical reserves (undiscovered coal, generally an extension of inferred reserves in which coal lies more than 4.8 km from a point of measurement). It is obvious that given the geological evidence so far available, the claim of 175 billion tons of reserves is highly speculative. If the Thar coal reserves had really been that big as is being claimed then there would have been a long queue of international mining giants trying to get concessions for mining rights. If such companies can go to places like war torn Iraq, they can certainly come to Pakistan. But the apparent lack of interest from foreign investors as a tell tale sign that these claims of huge and profitable reserves are not believed by the major players in the field.

However, even if these reserves are for example 3 billion tons instead of 175 billion tons, still significant amount of electricity can be produced from Thar coal.

The other common myth is that there is some organized conspiracy to stop utilization of Thar coal. Some people blame it on oil marketing companies that are allegedly afraid that the coal from Thar will significantly reduce oil consumption in the country. Others blame it on foreign powers that do not want Pakistan to be economically independent.

If anything the delay in exploitation of Thar coal can be attributed primarily to the economic rationale and to a lesser extent to the traditional slow pace of our bureaucracy. Much is made of the story of the Chinese company Shenhua which did a preliminary feasibility study of Thar coal but decided not to pursue the project further allegedly on disagreement with proposed tariff. In fact after doing a preliminary feasibility study in 2002, Shenhua had reached the conclusion that the Thar coal project was not feasible purely an economic basis at that time because the cost of extraction of coal was very high and based on international coal prices at the time, it made more sense to import coal for power generation. However, the company recommended that Thar coal should still be exploited for social reasons as the project would help in social uplift of the extremely backward Thar area.

A primary determinant in successful exploitation of any mineral resource is the cost of exploration vs. cost of import. For example, Canada has one of the largest reserves of oil in the world. But unlike Middle East where it is relatively much cheaper to extract oil from the ground, the cost of oil exploration is much higher in Canada. So it is not economically feasible for Canada to extract oil from its own resources at a higher cost when it can import the same from foreign sources at a much cheaper cost. However, as the price of imported oil increases, Canada will be extracting more and more oil from local sources. If the cost of extracting local oil for Canada is say $ 125, it does not make much sense to extract local oil when foreign oil is available at $ 40 a barrel but when the oil price in international markets rises to $ 150, Canadians will be going all out to extract more and more oil locally as it now becomes cheaper.

Developing the mining infrastructure is a much more time consuming process as compared to installing a power plant and is likely to take anywhere between 6-8 years. Therefore, the previous Sindh government could have started work on the mining of coal as that phase is likely to take about six years. In the mean time, it could have commissioned a bankable feasibility study for power generation. Furthermore, additional uses of Thar coal could have been investigated (as is being done now) like gasification, rather than unnecessarily focusing on making it an exclusively power generation project.

It is also another myth that this project will alleviate the need for hydel electricity. The fact is that any electricity eventually produced from Thar coal would be at least twice as expensive as that generated from large dams. The main problem in electricity sector is not how to generate electricity, but how to generate electricity at an affordable price. If the issue had only been power generation than we also have abundant wind and solar resources, but these cannot be fully utilized because electricity produced from these sources would be prohibitively expensive. The average power generation cost given the current generation mix of Pakistan is about 6.5 cents/kwh. Electricity from Thar coal would provide relief to consumers if it can be generated at a cost lower than this average.

However, previous Sindh government used to criticize NEPRA that had given an indicative tariff of 7.8 cents/kwh to Thar coal project saying that the tariff was too low and unacceptable. As a matter of fact that tariff was the highest coal based tariff anywhere in the world.

All this does not mean that Thar coal project should be abandoned. Given the current electricity crisis and the need to increase usage of indigenous resources for power generation, Thar coal can still prove to be a useful source of energy. Any electricity generated from Thar coal might help in reducing the need of importing expensive furnace oil. Gasification can also be a potential use of Thar coal.

The involvement of a professionally managed and reputed company like Engro Pakistan is also a good omen. Let us hope that it will prove to be a very beneficial project for the country. What it will do is diversify our electricity generation sources, save us some foreign exchange and decrease the present gap between supply and demand of electricity. Most importantly, it will bring much needed development and employment to Thar area.

 (The writer is a Chartered Financial Analyst and International Energy Consultant who has worked extensively in electricity sector in Pakistan.)